OTTAWA (Reuters) - The former governor of Canada’s central bank, David Dodge, said on Wednesday the global economy is unlikely to recover as quickly as it did after other recent recessions.
“The rest of the world, including the United States, is probably not going to recover as quickly coming out of this recession as it did coming out of 1982 or coming out of 1990-91,” Dodge told CTV television in an interview.
“There are a lot of reasons for that ... but I think we are putting our head in the sand a little bit if we really bank that the rest of the world is going to recover extraordinarily quickly,” he said.
Dodge, who stepped down as Bank of Canada governor over a year ago, stirred controversy in Canada on Wednesday with remarks to the Globe and Mail newspaper that suggested the current central bank chief, Mark Carney, was unrealistically upbeat in his latest outlook on the economy.
But on CTV, Dodge downplayed any differences with Carney on their respective outlooks.
Carney “was very careful in January to say that his view of a rather quick and strong recovery in Canada was conditional on a rather quick and strong recovery in the rest of the world, and that was certainly not an unreasonable point of view,” he said.
The central bank’s January projections were for a return to economic growth in the third quarter following two quarters of contraction, and growth of 3.8 percent in 2010 -- a view widely viewed as too optimistic.
Carney said on Saturday the downside risks to its January forecasts had materialized and that the bank would likely revise down its projections next month.
“We all know that 2009 is going to be a pretty grim year. We knew that last fall. It’s probably going to be a bit worse than we thought last fall,” said Dodge.
“We’ll probably hit the bottom by the end of this year but it’s going to take a little while for the world economy to grow strongly again.”
Carney took over from Dodge in February 2008, becoming the youngest central bank chief of the Group of Seven major economies. The former Goldman Sachs banker had been mentored for years by the older Dodge but has managed to put his own imprint on the central bank and is highly regarded at home and abroad.
Until now, Dodge had kept to a promise of not “breathing over the shoulder” of Carney by commenting on the state of the Canadian economy.
He is about to take on a new job as co-chair of a group created by the Institute of International Finance that will act as an early warning system for risk in the global financial system.
Reporting by Louise Egan; Editing by Frank McGurty